MiX Telematics Ltd ADR

Greetings and welcome to the Mixed Telematics Fiscal Fourth Quarter 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. John Granara, Chief Financial Officer. Thank you, sir. You may begin your presentation.

Thank you, and good morning, everyone. We appreciate you joining us to review Mix Telematics' earnings results for the fourth quarter of fiscal year 2022, which ended on March 31st, 2022. Today, we will be discussing the results announced in our press release issued a few hours ago. I'm John Granara, Mix's Chief Financial Officer, and I'm joined by Stefan Joselovits, or as many of you know him, Jos. He is President and Chief Executive Officer of Mixed Telematics. During today's call, we will make forward-looking statements related to our business, which are subject to material risks and uncertainties that could cause our actual results to differ materially. For discussion of the material risks and other important factors that could affect our results, please refer to those contained in our Form 10-K and other SEC filings, all of which are available on the Investor Relations section of our website. We will also be referring to certain non-GAAP financial measures. There is a reconciliation schedule detailing these results currently available in our press release, which is located on our website and filed with the SEC. With that, I will turn the call over to Jos.

Thanks, John, and thanks to all of you for joining the call today. Our fourth quarter results reflected strong execution by the entire mixed team as we continue to build on the momentum from recent quarters. We added close to 25,000 subscribers to end the quarter with a base of over 815,000, an increase of 9% year-over-year. Our subscriber base is now nearly back to its pre-pandemic levels. All three of our solution categories contributed to the strong growth, including solid new premium fleet customer additions. I would now like to quickly summarize our financial results for the fourth quarter and the full fiscal year, which John will review in more detail later. For the fourth quarter, subscription revenue of $31.3 million was up 7% in constant currency, excluding the one-time renewal fee related to a large contract modification in Q4 of last year. and adjusted EBITDA of $8.2 million at a 23% margin, which was ahead of our expectations and reflects our disciplined investment in growth and our ability to manage inflation headwinds. For the full year, annual recurring revenue ended the year at $127.1 million, up 9% year-over-year and in line with our expectations. Our ARR would have been higher, but like last quarter, the ongoing supply chain challenges are impacting vehicle deliveries to some of our customers. Consequently, some new project rollouts have been slower than planned. Our committed contract backlog continues to be at elevated levels and represents future growth as these vehicles get delivered and implemented. Adjusted EBITDA was $31.6 million at a 22% margin. The notable improvement in net subscriber ads was an important development in the quarter and reflects greater customer willingness to invest. As we have discussed for a number of quarters, overall demand and customer engagement has remained relatively high. We have started to see that translate into more normalized buying patterns, but it is not yet back to pre-pandemic levels. I would like to highlight a few key wins and milestones from the fourth quarter. Firstly, one of our global customers, Wholesome, achieved a major milestone, reaching 10,000 subscribers with Mix, having experienced remarkable improvements in safety and efficiency since starting to work with us in 2018. At fault fatal road crashes have been reduced by 83%, underscoring Mix's ability to save lives. Holcim remains committed to achieving further milestones in the coming years. In 2022, the company will be embarking on projects with us that will utilize AI technology to assist them in their quest towards achieving zero accidents. We look forward to continuing our long-term partnership and will soon be rolling out our technology to an additional 650 vehicles in Romania. In Brazil, we were awarded a significant contract expansion by an existing Bus & Coach customer. This client is adding 2,000 vehicles to our premium solution offering and in the process doubling the size of their connected fleet with us. After achieving a 15% reduction in fuel consumption across the vehicles currently leveraging our technology, the company now intends to drive more safety, sustainability, maintenance and fuel consumption benefits across their broader fleet. In the United States, we signed our first customer to one of the OEM telematics data services that we've recently integrated with. This was within a month of launching the MIX OEM Connect solution, which is an ongoing program to integrate with the embedded telematics services offered by various vehicle manufacturers around the globe. This initial win is an exciting early indication of opportunity with OEMs and the potential for a software-only deployment model. And lastly, in the UK, we announced a new contract with Martin Oliver Transport, a leading road transport service operating a modern fleet of heavy vehicles. This customer is particularly focused on optimizing its fleet management and driving monitoring capabilities. The fourth quarter was a solid finish to a successful year for the company. We delivered on each of our key goals for fiscal 22, namely We returned the business to sustainable growth with constant currency ARR growth of 9%. We were particularly pleased with the strength in our African business throughout the year, which saw a notable improvement in premium fleet demand. We delivered on our profitability target of low to mid 20s adjusted EBITDA margin, despite the supply chain and inflation challenges throughout the year. Our commitment to balanced, profitable growth allows us to quickly react to changing market conditions and is a key differentiating factor of our business model. We made significant progress investing in our sales and marketing and distribution efforts around the world. We added great talent to our go-to-market team that will help lay the foundation for even better growth in the years ahead. And finally, we developed a number of important innovations and expanded our solution portfolio throughout the year. This included enhancements to our AI video telematics solution, multiple new hardware variants to mitigate supply chain risks, a Canadian ELD solution, various OEM integrations, system support and reporting for electric vehicles, and enhanced embedded dashboards and analytic features. As we look ahead to fiscal 2023, we are increasingly optimistic about the long-term opportunity for mixed telematics. The breadth and depth of conversations with customers make it clear that a growing number of fleet operators understand the strategic importance of a comprehensive telematics platform. They recognize that deploying Mixer solution can generate significant improvements in operating efficiency, fleet uptime, and driver safety, and quickly generate meaningful return on investment. Our goal this year is to build on last year's success and make additional progress towards returning to our long-term financial targets of 15% to 20% constant currency subscription revenue growth and 30% plus adjusted EBITDA margins. Many of our key priorities this year remain the same. Specifically, we will continue to invest in our go-to-market efforts around the world. We have seen good returns on recent investments and see opportunities to go deeper in building out our demand generation and indirect sales channel efforts. We will continue to invest to improve and expand our product portfolio. A key focus will be to further simplify the installation process and enable customers to begin realizing value from their investment with Mix sooner, particularly in our premium fleet segment. For example, we will invest to make it possible for customers to bring their own device to deploy Mix solutions. like for ELD compliance in the United States. We are really pleased with the returns we are seeing from our product investments and know that reducing friction can drive faster customer adoption. We will invest in initiatives that will further improve our subscriber retention efforts. As the business improved throughout 2022, we have seen subscriber retention return to pre-COVID levels, which was an important driver in our return to revenue growth. We believe that there is an exciting opportunity to improve upon the success and drive even better results than we had historically. We believe that we will generate mid to high single digit constant currency subscription revenue growth and high single to low double digit annual recurring revenue growth in fiscal 2023. The expectation for accelerating growth year over year reflects the ongoing improvement in our business, but is mindful of the current macro environment related to the global supply chain, inflation and other challenges. We also expect to deliver another strong year of profitability with adjusted EBITDA margins in the low to mid 20s. Our margin outlook reflects our continued commitment to profitable growth and the incremental investments we expect to make in support of our long-term growth initiatives. Our profitability outlook for this year also takes into account the continued inflation challenges in certain aspects of the business. We have done a good job to date navigating the complex and quickly evolving cost environment. We are confident we will continue to do so this year, but the longer these challenges persist, the more difficult it can be to manage. Before I wrap up, I want to provide an update on our senior leadership team. John Granara has recently decided to leave MEXT to pursue another career opportunity closer to home. John has been an important member of our senior leadership team and has done a great job helping the company succeed during some highly challenging times in the market. John will remain as CFO through the end of June to complete our year-end reporting process and ensure a smooth transition. I want to thank him for his hard work and wish him all the best going forward. I'm pleased to announce that Paul Dell, our current chief accounting officer, will become chief financial officer next month. Many of you know Paul from his time as interim CFO several years ago. He has great experience with our business and is a seasoned finance executive. I'm excited for Paul and want to congratulate him on this well-deserved promotion. I would like to end by highlighting the success Mixed Telematics is having across the board. We believe we are entering a sizable investment cycle in vehicle and video telematic solutions in the market that should benefit our business for years to come. We feel very good about our ability to deliver on our long-term financial targets and generate significant shareholder value. This is an exciting time for the company, and I want to thank all of our employees for their hard work and commitment to our customer success. I would now like to turn the call over to John to review our financial results in more detail. John?